In examining additions to property and equipment for the year using the PPS statistical method you estimated a sample size of 40 additions. The remaining population recorded amount was $1,000,000, and you used a 5 percent risk of incorrect acceptance. After vouching the additions you found errors in two items as follows:

Required:

a. What tolerable error did you use in estimating sample size?

b. What is the basic bound of monetary error for your sample?

c. What are the maximum understatement and maximum overstatement?

d. What are the projected error of overstatement and projected error of understatement?

e. What are the net maximum overstatement and the net maximum understatement? f Would you accept or reject the account balance?

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Recorded amount Audited amount $5,000 2,000 $4,000 3,000